FOREX-Surging dollar holds near six-week high as virus fears return

* Dollar makes broad gains overnight as stocks sell off
* Japan holiday lightens trade in Asia, moves slight
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook
SINGAPORE, Sept 22 (Reuters) - A resurgent dollar held on to
overnight gains on Tuesday after virus fears and worries about
U.S. stimulus drove a wave of selling in just about everything
else.
The dollar rose 0.6% against the euro, 0.9% against the
Aussie and even made gains against the safe-haven currencies of
the Japanese yen and Swiss franc.
Against a basket of six major currencies =USD the
greenback hit a six-week high and held just below that in early
Asian trade at 93.547. Gold fell against the rising dollar.
"The equity selloff gathered quite dramatic momentum during
the European day and the risk-averse characteristics of the U.S.
dollar really came to the fore," said National Australia Bank
head of FX Ray Attrill.
The heaviest selling was in financials, after a fresh dirty
money scandal embarrassed global banks, but soon spread to other
sectors and asset classes amid worries about possible new
lockdowns as COVID-19 cases spread.
Investors are also fretting that the chances of more fiscal
stimulus in the U.S. are ebbing as campaigning dominates the
political landscape. MKTS/GLOB
"A lot now depends on whether or not what we've seen in the
last 24 hours is sustained," said Attrill. "There's good reason
to think that we could be in for a multi week period where the
dollar at least stops declining."
Some of the dollar buying moderated as stocks rallied off
session lows into the Wall Street close, but a clearer picture
may have to wait until the London open, with another public
holiday in Japan lightening volumes in Asia.
The Australian dollar AUD=D3 last sat at $0.7230, just
above a two-week low touched on Monday. The New Zealand dollar
NZD=D3 , which fell 1.3% in the rout, nursed losses at $0.6668.
The Norwegian krone NOK= , which was slammed 2% lower as
oil prices also slid, sat near a two-month low hit overnight.
The euro EUR= held just above a six-week trough at
$1.1766, while sterling GBP= was fragile at $1.2818 amid talk
of fresh restrictions in Britain as virus cases grow.
Britain will face an exponentially growing death rate within
weeks unless urgent action is taken to halt the outbreak, the
country's senior medics said on Monday. The Telegraph newspaper reported Prime Minister Boris
Johnson will encourage Britons on Tuesday to go back to working
from home. Perhaps the most confounding move overnight was the swift
unwinding of gains in the yen made during Asian trade.
The Japanese currency has been among the best performing
majors this month as jitters in stock markets have driven
safe-haven demand. But it slipped from a six-month high of 104
per dollar to 104.68 as investors crowded into dollars JPY= .
"It's not uncommon with sudden yen moves that it's driven by
domestic asset managers coming in to buy foreign assets at the
lows, and buying dollars to pay for them," said Stuart Oakley, a
London-based executive at Nomura.
"But I don't really know what is behind this particular
bounce," he said.
"My own personal view is this is all just a correction
within a major trend for stronger asset prices in the U.S. and a
weaker dollar, with the uber-easy U.S. monetary policy the
overwhelming driver of everything."
Also on Monday, U.S. President Donald Trump told thousands
of supporters at a political rally that he was rebuffed by
officials when he asked about adjusting the exchange rate of the
dollar in response to what he described as currency manipulation
by China.